We show that the quotient of Levy processes of jump-diffusion type has a fat-taileddistribution. An application is to price theory in economics, with the result that fat tails ariseendogenously from modeling of price change based on an excess demand analysis resulting in aquotient of arbitrarily...

The quotient of random variables with normal distributions is examined and proven to have have power law decay, with density f(x)~f_0 x^(-2), with the coefficient depending on the means and variances of the numerator and denominator, and their correlation. We also obtain the conditional...

Laboratory asset markets provide an experimental setting in which to observe investor behavior. Over more than a decade, numerous studies have found that participants in laboratory experiments frequently drive asset prices far above fundamental value, after which the prices crash. This...

A symmetric supply/demand model of price dynamics is developed and used to understand the relationship between price change and volatility. This differs from the classical approach in which the expected rate of price change and variance are assumed to be independent. The microeconomic and...